The desire to own a home is relatively universal, and once you decide it’s time to start looking at homes, a whole plethora of tasks begin to unfold in front of you. The average individual does not have hundreds of thousands of dollars of cash on hand, so the greatest task to tackle is getting approved for a mortgage. While lending companies may be willing to extend credit under certain circumstances, the reality of the situation is that the standards for being approved (quickly) for a mortgage are very high. There are a few things that you will need (and need to be aware of) when applying for a mortgage:
Strong & Lengthy Employment History
Lenders feel safer with lending when your recent employment history touts at least a 2 year stint at your most recent place of employment. The longer you’ve been working (and the smaller number of job hops that you have on your resume), the more trustworthy you become to banks.
Excellent Credit & Your Credit Reports
This is a bit of a no brainer; your credit score is one of the most important factor when it comes to being approved for a mortgage. Your FICO score can be in the 620-640 range to be approved for some loan programs, however a credit score of 720 or higher will lend itself to getting much better interest rates, which can equate to thousands of dollars saved over your lifetime.
Make sure to review all three of your credit reports before diving into the mortgage application process. An estimated 40% of credit reports contain errors that could be directly affecting your credit score. Make sure to get all discrepancies fixed as soon as possible.
Money Down & Cash on Hand
It is virtually impossible to get a loan without putting money down. The general rule is to be prepared to put down a minimum of 20% of the mortgage up front. It’s also important to remember that banks and lenders will also be checking your cash on hand. Lenders are weary of mortgage applicants that don’t have a significant enough savings; if a single emergency could clean out your savings, it is unlikely that you will get a mortgage.
Misc Important Documents:
- Records of your employment history for at least 2 years
- Records of your residence for at least 2 years
- Proof of Homeowner’s Insurance
- Pay Stubs from the last 2 months of employment